USHIO INC.

 SUSTAINABILITY REPORT 2016 13

Third-Party Opinion/
President’s Message CSR Management Feature CSR Action Plan Research and Development and
Intellectual Property/Corporate Data

CSR Action Plan

USHIO's Internal Control Framework

Governance

The USHIO Group recognizes that promoting the sustainable growth of the Company and increasing corporate value over
the medium to long term, as heralded in our management philosophy, will bring satisfaction to all stakeholders. To this
end, the Company strives to ensure the transparency and efficiency of corporate management and to reinforce corporate
governance for realizing speedy and resolute decision-making.

Corporate Governance Framework

At the Annual General Meeting of Shareholders on June 29, 2016, USHIO transitioned from a company with audit &
supervisory board structure to a company with audit and supervisory committee structure. The aim was to further
strengthen the supervision function of the Board of Directors as part of a drive to reinforce corporate governance in
order to ensure transparent and efficient corporate management and speedy and resolute decision-making.

This transition will foster speedy decision-making by delegating decisions for certain important business matters from
the Board of Directors to executive directors. It will also strengthen the supervision function of the Board of Directors
by ensuring that most of its members are outside directors. The new setup will also reinforce audit and supervision
functions by establishing an audit and supervisory committee with the authority to assess the legality and validity of
board members in performing their duties.

The Board of Directors comprises 12 directors. Nine are not Audit and Supervisory Committee members (including
five outside directors) and three are Audit and Supervisory Committee members (including two outside directors). The
Board of Directors oversees decision-making and business execution for top priority issues, including basic
management policies.

Delegating decisions on certain important business execution to overseeing directors has accelerated decision-making.
At the same time, the executive officer system has led to more accurate and speedier business execution. USHIO
established the Executive Council and Group Coordination Council to discuss and report on priorities in business
execution.

The Audit and Supervisory Committee, which comprises three directors (including two outside directors), audits and
oversees directors' performance of duties in line with its own audit and supervising standards. USHIO appointed a full-
time Audit and Supervisory Committee member to enhance the efficacy of audits by collecting information from
directors (excluding those who are also Audit and Supervisory Committee members) and employees and coordinating
smoothly with the Internal Audit Department and independent auditing firm.
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President’s Message CSR Management Feature CSR Action Plan Research and Development and
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Compliance
Transition to a Company with Audit and Supervisory Committee Structure
At USHIO, we have established a Compliance Committee, and we work to foster a corporate culture that observes laws
USHIO added three independent outside directors and three independent outside Audit and Supervisory Board
and regulations, practices corporate ethics, and respects Company rules.
members, and put in place a Remuneration Advisory Committee which consists of a chairperson and members
with outside director comprising the majority in keeping with efforts to reinforce corporate governance. The Compliance Committee promotes education and training to enhance compliance and prevent violations before
they occur. USHIO aims to spread awareness of compliance through questionnaires and internal newsletters,
USHIO has transitioned to a Company with Audit and Supervisory Committee structure to strengthen the
implementing a compliance awareness month, and holding a training conference once a year with lectures given by
supervision function of the Board of Directors and foster speedy decision-making by delegating judgments on
experts on a variety of compliance topics.
certain important business matters to executive directors and executive officers.
Furthermore, we have been promoting a Company-wide drive to deal with compliance concerns, including potential
After the transition, the Company has an Audit and Supervisory Committee comprising at least three directors of
risks. To achieve early-stage solutions, we have established an internal consultation desk as well as an external
whom a majority are outside directors.
consultation and reporting desk, known as the USHIO Helpline.

USHIO appointed a full-time Audit and Supervisory Committee member to enhance the efficacy of audits by
collecting information from directors (excluding those who are also Audit and Supervisory Committee members)
and employees and coordinating smoothly with the Internal Audit Department and independent Auditing Firm. USHIO Helpline

The USHIO Helpline has been in operation in the USHIO Group since October 2006. When any Group employee in
Japan is subject to or knows about improper behavior, such as workplace violations of laws and regulations, internal
rules, ethics or other standards for behavior, he or she can use this helpline for direct communication with individuals
outside the Group to consult or report on this improper behavior. The helpline allows for quick discovery and
correction of improper behavior together with measures to prevent recurrence. It provides access to consultations
while protecting individuals who use the helpline from any negative consequences.

All whistle-blowing statements received via an external channel are immediately reported to the chair of the
Compliance Committee, who is a managing director appointed by the president. Under the direction of the chair of the
Compliance Committee, USHIO aims to quickly resolve issues by conducting audits, responding to incidents, and
putting in place measures to prevent a reoccurrence. To prevent this system from losing effectiveness, USHIO takes
action to raise awareness of compliance through internal newsletters, training sessions and a compliance awareness
month.

Information Security

USHIO handles private information of frequent customers and is entrusted with their important Company information
and other information assets in the course of its business activities. We consider it a top priority to safeguard such
information from threats such as leaks and modification. Moreover, because we recognize that information is an asset
that generates value and is a source for increasing corporate value, we are taking measures such as raising awareness
of information security among our employees and improving our risk management systems.

This kind of management requires three interlocking initiatives: rules must be determined, a framework must be
created for observing those rules, and awareness must be raised. We implement these based on our information
security management rules and make sure they are applied uniformly and consistently for the USHIO Group
throughout the world.
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People

At the USHIO Group, people are one of the pillars of our CSR Action Plan. We are working to eradicate discrimination;
respect diversity and the rights of all people; eliminate harassment; promote worker health and safety; prevent child labor,
Specific examples include the promotion of countermeasures, such as having a certain secure area at each business
forced labor and slave labor; and avoid complicity in human rights infringements.
site where access is controlled with IC-embedded ID cards, antivirus measures for PCs, encryption of hard drives,
authorization management of operation systems, and strengthening the capacity to respond to disasters and faults.
Other measures include setting up automatic encryption for external email attachments, functions to prevent sending
emails to the wrong recipient, replacing PCs in conjunction with the end of support for Windows XP, enhancing
security control by replacing our PC asset management tool, strengthening Internet access control, and bolstering
Occupational Health and Safety
data access privileges by integrating our file services.
USHIO makes concerted efforts to ensure workplace safety and health with the aim of providing a safe and
Moreover, USHIO supports those of its employees that seek freedom of movement by letting them work outside the comfortable work environment for its employees. USHIO has implemented systems for the management of safety and
office with tablets and other mobile devices. USHIO is working to ensure and strengthen the security of these devices health that are optimized for the conditions of each business site. At each business site, USHIO has assigned expert
on par with the security of PCs, including by introducing management systems that enable employees to work outside staff as required by law, such as industrial physicians and fire prevention managers, established occupational health
the office, such as video conferencing via smartphones and tablets. and safety committees, set up subcommittees consisting of specialists, and taken initiatives to address work-related
risks. USHIO's Business Auditing Department conducts assessments of occupational health and safety. A system has
It is also important to enhance information security awareness and skills for each individual employee in order to been put in place so that matters of concern that arise from these assessments are reported to top management
prevent information leaks. We have therefore taken steps to increase awareness among employees of the various through the Compliance Committee, which is chaired by a member of the Board of Directors.
threats and opportunities where leaks may occur by implementing a Company-wide e-learning program and
conducting training for new recruits together with level-specific training. We promote these initiatives by operating a
PDCA cycle to ensure that this awareness penetrates our entire organization at every level.
Preventing Work-Related Accidents
In our ISO improvement activities, which started from fiscal 2016, we are supporting efforts to lighten workloads and
Safety patrols are conducted at each office and worksite, and we take preventive countermeasures in sequence after
streamline and accelerate operations. From fiscal 2017 onward, USHIO is launching a project to advance reforms to
identifying potential risks that result in serious injuries. We are also switching to alternatives to organic solvents that
the way employees work with Groupware, while focusing efforts on advancing innovation through changes in work
have been implicated in health problems.
styles and seamless communication internally and externally.

Frequency of Work-Related Accidents*

Initiatives to Prevent Corruption Fiscal 2012 Fiscal 2013 Fiscal 2014 Fiscal 2015 Fiscal 2016

0.55 0.00 0.00 0.00 0.26

USHIO's 10 Action Guidelines for business activities commit us to conducting fair and equitable business transactions,
and we have always taken vigorous action to prevent corruption. In 2010, USHIO became a signatory of the United
Nations Global Compact's 10 Principles, which include provisions for preventing corruption, and we support the
prevention of corruption and bribery in a variety of business activities.
In our operations, we are concerned about the risk of bribery to promote sales of laboratory instruments, light source
products and medical equipment to universities and government agencies. In sales of medical equipment in particular,
we stress the importance of maintaining proper relationships with our customers, namely medical practitioners. USHIO
regularly trains its sales staff on transparency guidelines with the aim of preventing corruption.
* The rate of lost-time injuries indicates the frequency of occupational injuries, based on the number of injuries or
fatalities caused by work accidents per one million work hours. The number of injuries and fatalities caused by work
accidents during a certain period is divided by the total number of hours worked over the same period, and
multiplied by one million to derive the rate.
(At USHIO, hitherto there have been no occurrences of major accidents related to fatalities or threatening human
lives during work operations.)

Newly appointed procurement managers rigorously further greater understanding of the Company's procurement
practices and work to prevent inappropriate relationships with suppliers. In operations related to the sale of our wide
range of products and the procurement of materials, there are concerns that efforts to prevent corruption and bribery
Information about the total number of occupational safety training sessions (foreman training) conducted at each
will become increasingly complex as the Company's scope of operations expands overseas, owing to the possibility
business site, as well as the implementation status as of the fiscal year ended March 31, 2016, is shown below.
that overseas laws and regulations pertaining to the prevention of corruption (especially FCPA in the US and UKBA in
(Currently, about 12 hours of training is given to each person.)
the UK) will apply to other regions.

Occupational Safety Training Sessions (Foreperson Training)

We conduct individual training on corruption prevention relating to each person's duties, and for manager-class
employees, we also conduct training based on the strengthening of anticorruption laws globally that focuses on the
aforementioned concerns. In this way, we ensure that everyone throughout the Company is aware of corruption Total number of Number of participants in fiscal
prevention. participants 2016

Three business sites (Harima, Gotemba,

337 10
Yokohama)
USHIO INC. SUSTAINABILITY REPORT 2016
President’s Message
Human Resource Development
In line with our management philosophy to “build both a prosperous company and prosperous employees,” USHIO aims
to develop independent, self-directed human resources through level-specific employee training programs that include,
career development training, selective training, several optional self-development education programs, and a diverse
range of other training programs.
Education and Training for Human Resource Development
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Young Executives Group
This system aims to nurture management personnel for the future. Members of the group are chosen from an openly
canvassed pool of applicants, typically young employees around 30 years of age from Group companies. There are
five target criteria: a dream, strategy construction ability, ability to act, collaboration, and ability to work in a global
setting. The participants learn theoretical knowledge, such as management strategy, and tackle specific initiatives
relating to actual management issues. They undertake these activities while exchanging opinions with upper
management and external experts, among others. Through this system, USHIO provides these highly motivated young
employees with opportunities to develop their career paths.
Big Sister and Big Brother System
The Big Sister and Big Brother System is a long-running training system that has existed for more than 30 years at
USHIO for training new recruits. During the first year of employment, veteran employees act as one-on-one guidance
counselors for new recruits to back them up. Female mentors are called Big Sisters and male mentors are referred to
as Big Brothers. In addition to providing guidance about daily work activities, they support the growth of new recruits
by helping them solve issues related to their corporate work lives and any personal struggles. The employees selected
to be Big Sisters and Big Brothers also undergo training. The Big Sister and Big Brother System, in combination with
other initial training for new recruits, has led to high retention rates of new employees in their third year (100% for
new employees that joined out of college in fiscal 2014).
Career Design Training
USHIO believes each employee can lead fulfilling lives while growing through their work, and that this begins with their own
aspirations. For this reason, we offer career design training to employees by age group as a venue for them to think about
their medium- and long-term careers and life plans, from the perspectives of “Skill” (training to acquire the ability to perform
work), “Can” (exploring one's own possibilities), “Will” (deciding what to do), and “Must” (confirming what they should do).
In fiscal 2016, young employees in their first, second or third year at the Company were paired with line managers
aged 50 and up.
Disclosure of Annual Employee Training Hours and Costs
The number of hours spent training employees at the Company, centered on training to improve their skills, and the
amount spent on this training is detailed below for fiscal 2015 and fiscal 2016.
Fiscal 2015 Fiscal 2016
Total amount spent*1 ¥70,675,000 ¥96,995,000
*2
Total time spent training 13,586 hours 43,445 hours
Total number of people who received training 1,333 people 1,834 people
*1 The total amount of education outsourcing costs, venue costs, and other expenses paid externally.
*2 Total time spent for skill improvement training, which includes the aforementioned support for self-development,
the Young Executives System, level-specific training, occupation-based training, and training programs for new
recruits. The total time excludes training for individual purposes, such as training for occupational safety and
health, training in compliance, and various training programs according to work role.
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Diversity at USHIO Work-Life Balance

Utilizing Global Human Resources Support Programs

Overseas sales account for approximately 80% of the USHIO Group’s total sales. Human resources capable of blending
in to communicate and understand local needs are indispensable in promoting business overseas. We are therefore
working to develop and utilize global human resources by conducting international study programs and hiring
international students, as well as by providing opportunities for interaction between Group companies.
Employment of People with Disabilities
In the fiscal year ended March 31, 2016, USHIO achieved a ratio of employees with disabilities of 1.92%, slightly below
the legal requirement of 2.0%. We will continue taking steps to make our workplaces barrier-free, including installing
sliding doors in restrooms and handrails on stairways, and to promote employment of people with disabilities going
forward.
USHIO aims to be able to flexibly accommodate diverse values and work styles regardless of employees' lifestyles and
gender. As part of this, we have a support system for childcare leave that offers much more than the legally required
level of support.
As an additional support for employees balancing parenting with work, we uploaded the Work-Life Balance Handbook
on our intranet portal for employees. The handbook contains information on programs for balancing work, as well as
information on childrearing and maternal welfare, how managers should respond, and other tips for employees who
would use the programs and for their managers.
We have also enhanced the work environment to enable people to balance work and parenting while encouraging them
to review their way of working in order to achieve a good work-life balance. For example, we conducted “no overtime”
days and put up posters to promote them, and organized visiting days for children and family day events. The ratio of
women returning to work after taking maternity leave is virtually 100%, and several male employees also take childcare
leave each year.

Re-Employment Systems
USHIO actively supports employment for seniors. We have established extended employment programs (Senior
Partner Program and Senior Expert Program) that are conducted through our re-employment system. These popular
programs allow employees to work up to the age of 65.
Consequently, for the fourth time we earned the Kurumin certification as a company that supports the raising of
children under the Act for Measures to Support the Development of the Next Generation.
People Taking Childcare Leave

In November 2015, USHIO newly established the Job Return System for rehiring employees who had to leave work to Fiscal 2013 Fiscal 2014 Fiscal 2015 Fiscal 2016
attend to family matters. This system aims to rehire employees and redeploy the skills and abilities that they developed
while working at the Company, enabling them to once again play an active role. Men 5 4 3 5

Women 32 29 25 22

Support for Working Women Total persons 37 33 28 27

We believe that diverse sensitivities, approaches, and abilities are needed in order to generate new business amid the
matured economies of the industrialized nations. Consequently, we have more than doubled the percentage of female USHIO's Work-Life Balance Support System
employees in sales and technical positions over the past five years.

On April 1, 2016, USHIO adopted a personnel system that does not take gender into account while eliminating the
distinction between main career track positions and general staff positions. USHIO promotes personnel into
management career track positions without regard to gender, and aims to triple the number of women in management
positions by 2020.

At USHIO, the average length of service for its employees has increased every year, reaching an average of 18 years
in fiscal 2016, with female employees working more years on average than their male counterparts.
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Quality

To accurately grasp the needs of our customers, we think from their perspective, then work as one with our business
partners to improve our product development and quality. In this way, we provide products and services with appealing
Communication quality that goes above and beyond the run-of-the-mill.

Communication with Lunch

At USHIO, the president has lunch meetings with employees in a bid to facilitate communication in a casual setting.
Under an initiative started in fiscal 2015, USHIO holds “Communication with Lunch” meetings to expand the scope of
the original lunch meetings to include business managers and facilitate communication between as many employees
and managers as possible.
This initiative provides the president and other members of the management team with an opportunity to
communicate directly about the Company, the direction of business, and their thoughts and ideas about them. At the
same time, it allows employees to get to know management. The lunches are a valuable time, where participants can
hear about things that they usually don't hear, from difficult topics regarding the organization and management to
more private themes such as personal approaches to work and work styles and ways to learn English.
“Communication with Lunch” Meetings Held and Number of Participants
Quality Assurance Divisions
USHIO has a system for improving the efficiency and speed of its quality management system, and started new
activities in fiscal 2016. We will maintain our mechanisms for swiftly responding to customer needs while meeting the
requirements of ISO 9001. We will aim to achieve radical innovation not bound needlessly to rules and firmly anchored
in front-line realities, as we strive to achieve even higher levels of customer satisfaction.
We adopt best practices for ensuring quality from the accumulated expertise of each business division through
collaboration between the Quality Assurance Division of each business division. We have also established quality
management systems based on legal standards in the medical equipment business.
By strengthening our ties with overseas production affiliates and Group companies, we aim to improve the level of
quality assurance throughout the entire USHIO Group.

Lunch host Number of lunches held Number of participants

President 10 47 UPS (USHIO Production System)

General managers, etc. 31 147 UPS (USHIO Production System) is an initiative aiming to establish a unique new production system that started at
USHIO's Harima Division in fiscal 2012. Amid a rapidly changing business environment, it is important to be able to
Total 41 194 efficiently supply high-quality products in any environment. To achieve this, we saw the need to think outside the box
and promote improvements from a broad-ranging perspective by integrating our ongoing UPS, TPM and TQC
improvement activities, rather than repeatedly going over the same ground.

World Café

In fiscal 2015, employees conceived and led the World Café project, which aims to achieve a “vibrant workplace with a Activities Until Now
healthy corporate culture.” The goal of the World Café is to draw attention to the importance of communication by
The main thrust of the UPS movement is ZD (zero-defects) activities, which seek to eliminate defective work by
having fellow participants who do not know each other well come together in a relaxed atmosphere, engage in dialogue
stimulating individual autonomy and enthusiasm among employees and fostering creative thinking. Traditionally, the
about specific topics, and talk openly with one another.
movement consisted of three pillar groups, the Manufacturing Technology Group, Quality Assurance System Reform
Group and Education and Enlightenment Group.

USHIO has been conducting small-group activities at our business sites since April 2014 to engage all employees at
each business site in activities to improve quality assurance and visualization. This initiative began with 91 groups
which implemented specific measures to improve quality, trained personnel able to autonomously manage quality, and
helped raise awareness of quality at sites.

In fiscal 2016, we created new supporter positions within departments to provide assistance to the 90 small groups,
with women and young employees taking the lead. These supporters provide follow-up assistance instead of
secretariats. For the organization, this became an opportunity to switch to our current system, integrating efforts to
improve quality with actual work processes, thereby creating a structure for the homogenization of mindsets and
support for independent action on quality assurance.

In fiscal 2017, 88 small groups will continue to work with supporters with the aim of reducing the ratio of follow-up
assistance from the quality promotion secretariat to zero, thereby entrenching initiatives to further improve quality.
USHIO INC. SUSTAINABILITY REPORT 2016
President’s Message CSR Management
Improving and Embedding Value in Human Resource Development
We believe that “in order to produce good products, it is first necessary to produce good workers.” We are training
supporters to encourage autonomous activities at business sites. From fiscal 2017, we aim to improve and embed the
value of human resource development by enhancing our training curriculum into one that offers more practical
lessons and techniques.
From now on, too, through the continuous, steady accumulation of activities, we will establish platforms for
manufacturing that can be visualized and build up expertise. At the same time, we will continue activities to enhance
the efficiency and vitality of our workplaces.
Product Development Related to Biomedical QOL Improvement
The TheraBeam® UV308 excimer light phototherapy device, which uses ultraviolet light to treat skin disorders, was the
Biomedical Business Division's first product. Since then, USHIO has obtained the legally required permits and expanded
into other business fields, ranging from medical equipment to external diagnostic reagents.
Moreover, together with a Group company and a clinical diagnosis company, USHIO has launched a blood analyzer
business for the early detection of risks for contracting colorectal cancer and diabetes, diseases that are afflicting an
increasing number of people. These risk analysis operations can lead to the preventative treatment of diseases by
halting their progress, thereby improving quality of life and reducing medical expenditures.
Customer Service Center Initiatives
At our Customer Service Center, we take the customer's viewpoint and prioritize stable operation of customers'
equipment and customer satisfaction. We work to provide them with confidence and safety, on time, while continuing
to take various measures to ensure that we retain their trust and reliance.
Recently, more and more of the end users for our equipment products are spread throughout the world, so we are
taking steps to enhance our local service systems through links with our bases in the US, China, Taiwan, and South
Korea. While strengthening our local service systems, we will seek to provide enhanced proposal-based services. We
will continue striving to enhance service products and provide the value that customers require to increase customer
satisfaction even further.
Creation of Business Models with IT
In fiscal 2017, USHIO reorganized its IT division. In the fields of the administration of internal IT systems, security and
education, USHIO has reorganized and further strengthened its organization, including by updating platforms that
contribute to business, adding roles for adapting to new business models and promoting innovation through internal
business process reforms.
As new added value for existing business models, USHIO has become aware of automation with IT solutions, and
started to examine the creation of solutions to enhance productivity and quality for the IoT business and for its
customers that possess manufacturing sites.
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BCP Initiatives
USHIO commands extraordinarily large market shares for many of its light source products used in various industries.
Recognizing our important responsibility to ensure stable supplies of these products, we have been actively promoting
business continuity plans (BCPs).
In April 2012, USHIO established the BCP Committee as an entity for the entire Company and formulated a business
continuity plan for its key bases in the light source business, while starting to build a framework for mitigating damage
and quickly recovering from a natural disaster and collaborating with other bases.
In April 2014, we created the USHIO BCP, an integrated business continuity plan for the entire Company that covers
all of its bases. This BCP defines the organizational entities that oversee labor, capital procurement and public
relations, and calls for periodic drills and training for these entities in a constant review of the structure and its
responsiveness. Through training sessions, we spread awareness of our BCP activities to other layers of the
organization. Looking ahead, we will address issues related to our response to additional risks, such as damage from
natural disasters and incidents caused by people, as well as the proliferation of BCPs throughout the Group.
About the CSR Procurement Policy
USHIO is meeting its social responsibilities as a corporate citizen by supplying superior products and services to the
global market through free and open corporate activities. For its procurement activities and in the spirit of
encouraging coexistence and prosperity for all, USHIO has defined the five points below as the USHIO CSR
Procurement Policy, encapsulating its respect for laws, social norms and environmental protection.
1. Human Rights Alongside Occupational Health and Safety
2. Environmental Consideration, Green Procurement
3. Ensure Product Safety
4. BCP (Business Continuity Planning)
5. Fair and Equal Transactions, Legal Compliance
CSR Procurement Policy
Promoting CSR Procurement with Our Suppliers
The USHIO Group's Green Procurement Standards encourage its suppliers to improve their environmental
responsiveness by requiring them to establish environmental management systems based on ISO 14001 or Eco Action
21.
USHIO periodically conducts CSR response status surveys (questionnaires, etc.) of its suppliers. We ask our suppliers
to evaluate their own environmental management systems and CSR response status, and use the results of these
surveys to promote better CSR responsiveness at our suppliers.
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Environment

We at the USHIO Group recognize symbiosis with the global environment to be one of today's most important challenges
for enterprises. We pledge to contribute to the creation of a sustainable society by incorporating measures for
Advancing CSR Procurement
environmental protection into every aspect of our business activities.

While aiming to improve the CSR responsiveness of its suppliers, the USHIO Group gives preference in its transactions to suppliers
that have demonstrated excellent CSR responsiveness. As a result, CSR procurement is advanced throughout our supply chains.

In its environmental activities, the USHIO Group has been strengthening the environmental responsiveness of Group
companies, centered on USHIO. The USHIO Group Procurement Conference is periodically held with procurement
managers from each base in attendance. During the conference, we reiterate procurement policies to promote specific
courses of action in management. This conference also allows us to address customer requests on a worldwide basis.
2020 Environmental Vision
The USHIO Group formulated its 2020 Environmental Vision with the goal of becoming a company able to contribute
through its business activities to the realization of a low-carbon, recycling-oriented, biodiversity-preserving society by
the year 2020. USHIO has been promoting Phase Five of its Environmental Action Plan since fiscal 2017.

Overseas Procurement

As companies continue to globalize, the social responsibility required of them has increased, and the scope of that Review of Phase Four of the Environmental Action Plan
responsibility has widened. Issues with human rights relating to overseas labor conditions, water and environmental
pollution due to resource development, or issues relating to mined resources in war-torn areas are among the
Under Phase Four of the Environmental Action Plan (fiscal 2014 to fiscal 2016), USHIO had worked toward achieving
responsibilities̶and risks̶that we bear both directly and indirectly through our supply chain.
its objectives to expand sales of environmentally conscious products, implement global warming countermeasures,
manage chemical substances, conserve natural resources, and preserve biodiversity.

Group Development As a result, USHIO achieved its targets for reducing the volume of CO2 emissions at its business sites and in
distribution, improving the reliability and efficiency of CMS, and reducing waste volume. However, we have some issues
Group company supply chains extend throughout Japan and the world. The Group Coordination Council sets CSR left to address, and need to revise our standards for creating Super Green Products and expanding sales of
procurement policies and ascertains conditions, and the USHIO Group Procurement Conference debates specific environmentally conscious products.
initiatives for CSR procurement.

Checking for Conflict Minerals

The USHIO Group uses tungsten, tantalum and other minerals to make the electrodes and filaments in its lamps. To do
this, and based on our Basic Policy Statement for Conflict Minerals, Group companies and our suppliers are prohibited
from using conflict minerals. USHIO checks for the use of any conflict minerals and reports the results of its findings
to customers using the EICC/GeSI Conflict Minerals Reporting ledger sheet.

(Conflict Minerals)
In accordance with the clause on conflict minerals in the US Securities and Exchange Commission's Dodd-Frank Wall
Street Reform and Consumer Protection Act, companies listed on US stock exchanges are legally obligated to disclose
and report on their use of conflict minerals in their products. Conflict minerals include tantalum, tin, gold, and
tungsten, produced in the Democratic Republic of the Congo or adjacent countries.

Basic Policy Statement on Conflict Minerals

We shall not use conflict minerals (tantalum, tin, gold, and tungsten) produced and sold by armed forces
in the Democratic Republic of the Congo or adjacent countries.

We shall convey USHIO's policies on conflict minerals to our suppliers, and conduct necessary surveys.

We shall stop purchasing materials if it becomes evident they are made with conflict minerals.

Kenji Hamashima
President and Chief Executive Officer USHIO INC.
October 1, 2014
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Results of Phase Four of the Environmental Action Plan Future Issues in Light of Outcomes of Phase Four of the Environmental Action Plan

Environmental themes Initiatives Phase Four target Phase Four results Evaluation Environmental themes Issues
Creation of Super Green
Creation of Super Creation of Super Green Review and manage framework for certification system
Products: Accumulated
Design of Expand sales of Green Products Products: Accumulated total of 3
total of 20 Expand sales of Examine specific measures for improving corporate image
environmentally environmentally
conscious conscious environmentally conscious Stay ahead of environmental regulations and other trends, focus on development
Sales ratio of Increase sales ratio of Increased sales ratio of
products products environmentally environmentally conscious environmentally conscious products and sales promotions to create new products, applications and markets
conscious products products by 50% products by 25% Assess related Group companies (create guidelines and frameworks)

Reduce CO2 Reduce CO2 emissions by Reduced CO2 emissions by 6%

emissions at 3% from fiscal 2013 from fiscal 2013 levels on a sales
Broad disparities at each business site in activities to reduce the volume of CO2
business sites levels on a sales unit basis unit basis* emissions. Need to more tightly manage activities to reduce the volume of CO2
Global warming
Global warming
emissions at major sites.
Harima Division: Down 17% countermeasures
countermeasures Reduce CO2 Reduce CO2 emissions compared with fiscal 2014
○ Worked to increase transportation efficiency in distribution, but looking ahead, we
emissions in per unit of shipments will continue examining the selection of transportation vehicles for larger products.
distribution (down 1% year on year) Gotemba Division: Up 7%
○
compared with fiscal 2014
1. Improve customer responsiveness in green procurement and deploy across
USHIO improved the framework the Group
to apply to equipment products, A structure was put in place for equipment products and new products, but looking
new products and procuring
ahead, we will continue to unify information across business sites and promote the
Improve and integrate parts and materials overseas,
Improve reliability automation of survey work.
CMS framework for more extending it to each bases.
and efficiency of ○
efficient and reliable Gotemba began to effectively Management of chemical Effectiveness differs according to the site. We will improve weak sites.
CMS
management manage CMS, and some substances
overseas bases began to
independently conduct surveys 2. Promoting CSR procurement
Promote and answer customer questions. Created the CSR Procurement Policy and commenced activities, but activities have only
environmentally
spread to some sites. We will proceed with their deployment to other business sites.
conscious USHIO has introduced a system
operations able to respond to customer
Not enough specifics for each CSR procurement activity item. Because internal and
(enhance requests about environmental external disclosure can be improved, we will pass on the relevant information.
environmental surveys, and improved efficiency
Management of
productivity) by using the web to share
chemical Resource conservation Need to try and increase the effective resource usage ratio, which has been on the decline.
information between business
substances
sites and answer questions from
suppliers.
Put in place a structure Distribute industry guidelines and other information
Enhance customer that facilitates a precise
USHIO reduced parts that Biodiversity preservation
contain prohibited substances ○ Need to spread awareness of principles
responsiveness and rapid response to
from the design stage by
customer demands
exerting control through a
system that determines legal
regulations.
USHIO automated the
management of acquired
Phase Five of the Environmental Action Plan
environmental data and reduced
parts that do not have
In April 2016, USHIO launched Phase Five of the Environmental Action Plan, which had been formulated based on an
environmental data.
analysis of the results of and data obtained from Phase Four of the Environmental Action Plan, and it also reflects the
Reduce waste by 3% Reduced waste by 20% from concerns of stakeholders and discussions with Group companies. In drawing up this plan, USHIO placed an emphasis
Resource Resource
from fiscal 2013 levels on fiscal 2013 levels on a sales unit ○
conservation conservation on proactively addressing environmental regulations for products, developing products from the perspective of social
a sales unit basis basis
contributions in addition to the environment, managing chemical substances at business sites, reducing the volume of
Disclose
Biodiversity Biodiversity Preserve biodiversity Monitored trends (prepared to water resources used, and promoting environmental conservation based on environmental risk factors. Among future
environmental △
preservation preservation around business sites deploy industry guidelines) issues, USHIO will address such issues as how to effectively raise Group-wide environmental performance and how to
information
advance compliance with the 2015 version of the ISO 14001 Environmental Management System.
〇 = Achieved　△ = Partially achievedt　x = Not achieved
* From fiscal 2016, there was an increase on a unit basis as a result of an increase in the number of sites subject to data Phase Five of the Environmental Action Plan was designed to bring USHIO closer to achieving its vision for 2020. The
collection alongside an increase in Group companies. Based on levels prior to the increase in sites, USHIO achieved its targets. following initiatives are specific measures under the plan.
USHIO INC. SUSTAINABILITY REPORT 2016 22
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Phase Five of the Environmental Action Plan (Fiscal 2017 to Fiscal 2019) Develop Products That Contribute to the Environment and Society
Development of Super Green Products

In line with its efforts to create environmentally conscious products and based on its own certification standards,
USHIO designates products that proactively use environmental technologies as Super Green Products. Super Green
Products are flagship products that demonstrate excellent environmental qualities, such as energy efficiency,
extended lifetimes, 3R design, materials used, and applications. USHIO has certified 19 Super Green Products that
have cleared numerical benchmarks based on the USHIO environmental factor.

In fiscal 2013, USHIO proactively improved the environmental performance of product lines that take advantage of its
unique strengths in light, certifying products such as special lamps and LED light sources for medical equipment, and
high-value-added industrial process equipment that conserves energy. Certifications of products made by Group
companies steadily increased since the fiscal 2012.

Three products were newly certified in fiscal 2014 as a result of USHIO enhancing the environmental performance of
product lines that take advantage of its unique strengths in light sources, including LED light sources and other high-
value-added industrial process equipment that conserve energy. Looking ahead, USHIO expects to proactively develop
certification initiatives, including reviews of certification standards.

Correction

There was an error in the number of certified Super Green Products that we reported for fiscal 2015. The correct
number was an accumulated total of three certifications for the three-year period of Phase Four of the
Environmental Action Plan (fiscal 2014‒fiscal 2016). We apologize for this mistake.

Reduce Volume of CO2 Emissions in Business Activities

Initiatives at Main Business Sites

ISO 14001 Environmental Management System

Transition to the 2015 Version of ISO 14001 Environmental Management System Harima Division

Viewing the 2015 revision of ISO standards as an opportunity, our work group for the ISO committee began advancing The Harima Division accounts for about 27% of the USHIO Group's total CO2 emissions. The Harima Division reduced
initiatives in fiscal 2017 to comply with and transition to the new standards while slimming down and speeding up its electric power consumption by 1.92 MWh (86.4 t-CO2 equivalent) in fiscal 2016 as a result of autonomous efforts
internal compliance. Our key focus is tying ISO into core business functions while emphasizing effectiveness by to evaluate and reduce standby power consumption in all buildings and life tests of lamps, as well as activities to
reinforcing the management system and legal compliance. conserve energy in clean rooms.

Every summer and winter, USHIO cooperates with energy conservation initiatives in the Kansai region by reducing
electricity usage during peak demand periods based on demand projections for production facilities and the power
usage of life tests of lamps.

USHIO has also made considerable improvements over the past few years on a per-unit basis. Since measures to
conserve energy have become more complex, looking ahead, USHIO aims to further advance measures to conserve
energy from a medium- to long-term perspective while reducing costs by proactively incorporating external
information on energy conservation.
USHIO INC. SUSTAINABILITY REPORT 2016 23
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Gotemba Division Management of Chemical Substances, Resource Recycling, and Preservation of Biodiversity

The CO2 emissions of the Gotemba Division account for around 8% of the
USHIO Group's total. Since most of the products manufactured at the
Gotemba Division are assembly-type products, the power used for air
conditioning accounts for a relatively high proportion of the division's overall
power consumption. The division has worked to reduce the energy used by
installing solar power generation equipment and promoting improved
operation of air conditioners, upgrading and refurbishing them to power-
saving models, and installing LED lighting and human-sensor lighting switches.
Moreover, the division has carried out emergency electricity-saving measures
as requested by the Japanese government, along with electricity-saving measures for the summer season. The division
implemented electricity-saving efforts by using an electricity monitoring system and by reviewing floor layouts,
resulting in sustained energy conservation activities. In recent years, the optimal amount of watering for the roof and
air-conditioning outdoor unit is being automated by taking advantage of sensors, and further reductions of the air-
conditioning load are being promoted. As a result, the effect on the volume of CO 2 emissions is projected to be a
reduction of 12.8 kl per year.
CSR Procurement
Overseas Procurement and Group-Wide Implementation
USHIO also procures items from overseas suppliers, and from fiscal 2016, started a survey of overseas suppliers close
to the level of the survey conducted on domestic suppliers, targeting high-volume transactions and items that are
often used in general merchandise. Since the situation differs in each region and country, we seek to create a road
map through discussion, and continue to conduct surveys.
Reducing Harmful Chemical Substances
In fiscal 2011, our efforts to reduce harmful chemical substances included gathering information about their status at
each business site and selection of the chemical substances to be reduced. As a result, we decided to reduce our use
of volatile organic chemicals (VOCs) in line with the recommendation of four electrical machinery and electronics
associations in Japan. Since fiscal 2012, we have been reducing the consumption of VOCs by means of reviewing our
production facilities.
Initiatives at the Harima Division
At the Harima Division, USHIO has been reducing the amount of chloroform used in the lamp manufacturing process
because of concerns that the chloroform produced is an air pollutant. We plan to methodically reduce by half the
amount of chloroform used, which has been roughly approximately 10 t annually, by fiscal 2017. More specifically,
USHIO had deployed sealed automated equipment, and has methodically applied measures to reduce the size of
openings when equipment is used on each of its production lines. Chloroform usage has been trending as shown
below. In addition to helping conserve the environment, the installation of the new equipment has also proved to be an
effective method in terms of safety by eliminating any contact of chloroform with workers' skin by avoiding the risk of
an exposure aperture.
In September 2016, USHIO installed its second unit, following the installation of the first one in 2015. The amount that
chloroform usage is reduced depends on the volume of lamps that we produce. Like the first unit, USHIO expects the
second unit to reduce chloroform usage further by reliably lowering the evaporation amount through sealing the unit,
automation, and shrinking the size of apertures.
Amounts of chloroform usage

In particular, USHIO has been emphasizing dialogue with its suppliers and focusing efforts on holding explanatory Fiscal 2013 Fiscal 2014 Fiscal 2015 Fiscal 2016
briefings and disclosing information on its website. USHIO holds explanatory briefings for its suppliers in a timely
8.15 t 8.70 t 7.00 t 6.80 t
fashion, following revisions to laws, regulations and standards, and other factors.

On revising the USHIO green procurement standards, we reviewed all the standards in line with amendments to laws In addition, USHIO makes a concerted effort to act appropriately, including by using alternatives to other chemical
and regulations, added chemical substances for our suppliers to check, and explained the revisions. With regard to substances.
CSR procurement, we promoted CSR procurement throughout the supply chain after explaining the USHIO CSR
Procurement Policy and conducting the CSR Procurement Survey.

We create opportunities for our suppliers to learn more about the meaning behind CSR procurement at USHIO and Business Site Chemical Substance Registration System
the benefits of working together through questionnaires and explanatory briefings about our procurement activities.
As a new initiative beginning in fiscal 2017, USHIO launched a system that requires business sites to submit an
Moreover, USHIO raises awareness of its vision for CSR with suppliers by explaining its evaluation system based on
application to use a new chemical substance if they need to use the substance. The chemical substance is evaluated
human rights and labor, occupational health and safety, the environment, fair and ethical trade, quality and safety,
prior to its use, and only approved chemical substances can be used in products. This system is also used as a tool in
information security, social contributions and business continuity planning (BCP).
pollution risk assessments and occupational safety evaluations.
When necessary, USHIO interviews and audits suppliers that have room for improvement in their CSR initiatives, and
provides guidance for areas in need of improvement. We aim to improve CSR by helping our suppliers in these ways.

In order to more effectively and efficiently advance these activities, USHIO evaluates its suppliers, sets priorities, and
carries out CSR activities in its daily operations.
USHIO INC. SUSTAINABILITY REPORT 2016 24
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Society

As a member of the international community, USHIO will contribute to the development of respective regions where it
conducts business. The Group has a growing body of contribution examples following its expansion in Japan and overseas,
and in addition to the initiatives reported here, is engaged in various activities in the fields of education, culture, disaster
support, and exchanges with local society. These areas are vital aspects of sustainability.
The USHIO Foundation
Establishment of a Scholarship Fund at Suzhou University in China
USHIO (SUZHOU) CO., LTD. signed an agreement in January 2009 with China's Suzhou University to establish the
Suzhou University USHIO Scholarship Fund. Every year, a number of students are awarded scholarships. Over the
seven-year period up to 2015, a total of 205 male and female students have benefited from the Suzhou University
USHIO Scholarship Fund.

The USHIO Foundation was established in 1994 to commemorate the 30th anniversary of the founding of USHIO. As
globalization progresses, the foundation will contribute to society by assisting the development of the next generation Accumulated Number of Students Awarded Scholarships
of human resources, including overseas students, who will be responsible for leading the world in the future, and
promote further interaction and mutual understanding between Japan and other countries.
Fiscal year Number of men Number of women Subtotal

In fiscal 2016, the foundation provided scholarships to 43 graduate students (including overseas students) and 12
Fiscal 2010 15 20 35
students in specialized courses at colleges of technology. So far, 518 scholarship students have been supported, and
we continued to focus on calling for scholarship applicants from schools in areas affected by the Kumamoto
Fiscal 2011 12 23 35
Earthquakes.
Fiscal 2012 12 23 35

Fiscal 2013 11 24 35

Fiscal 2014 5 15 20

Fiscal 2015 8 12 20

Fiscal 2016 7 18 25

Total 70 135 205

Successful scholarship recipients at a certificate bestowal ceremony

At the fiscal 2014 commendation conference

USHIO INC. SUSTAINABILITY REPORT 2016
President’s Message CSR Management
Contributions to the Local Communities of USHIO (UI)
Holding USHIO DAY 2016 in Himeji, the City in which USHIO Was Born
On March 26, 2016, USHIO DAY 2016 was held at the Earth Cinemas Himeji, a
cinema complex equipped with the latest USHIO Premium Theater System. This
event was held to convey our gratitude to local residents, particularly as USHIO
had commemorated its 50th anniversary in 2014. The event was designed to
showcase the wonder of movies to a large number of local guests.
On the day of the event, local children and their guardians were invited to attend
for free. Several children excitedly said that it was their first movie at a movie
theater and enjoyed the impressive sounds and visuals. During the event, in
Making ecobags addition to offering tickets for special movies at a discount, we held sessions for
making traffic-safety keyholders shaped like a projection lamp and ecobags. We
also showcased the MicroTiles Wall Display System manufactured by CHRISTIE
DIGITAL SYSTEMS.
Holding Workshops at Tsukuba Science Edge 2016
On March 26, 2016, USHIO exhibited at Tsukuba Science Edge, an annual event held for junior high school and high
school students studying sciences. This was the third year that we participated.
This year, our New Technology Development Department ran a workshop on “welding with light.” The event this time
had a fair number of female student participants, and many students proactively participated in a quiz-format Q&A
session.
We surveyed the students (the second time so far) who participated, and more students than on the previous occasion
said that the workshop increased their interest in or understanding of science. We believe it provided a valuable
learning experience that opened students' eyes to the potential of light.
In the future, we will continue to talk about the fascinating aspects of light, the core of USHIO's business, while
stimulating the intellectual curiosity and spirit of inquiry of as many students as possible.
Participation as Volunteers and Runners in the World Heritage Himeji Castle Marathon 2016
On February 28, 2016, USHIO employees once again participated as runners and volunteers in the World Heritage
Himeji Castle Marathon 2016, which is held in Himeji. A total of 10 employees participated as volunteers, helping to
keep spectators from entering the course and preventing people from throwing objects.
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Contributions to the Local Communities of USHIO LIGHTING (ULI)
Supporting the “Pink Ribbon Illumination” through Dynamic Lighting at the
JR Himeji Station Building
The Pink Ribbon Movement* has gained recognition around the world as an educational campaign. As a part of this
movement, the Pink Ribbon Illumination event was held in Himeji on Oct. 1 to 3 in 2016. USHIO LIGHTING, INC. (ULI)
supported part of this event as lighting provider. ULI graphically illuminated the JR “piole HIMEJI” Building at Himeji
Station on Oct. 3.
Piole HIMEJI's wall has approximately 1,560 full-color LED light bars and 45 LED floodlights. Normally, the wall is filled
with multi-colored illuminations of dancing white-necked herons (symbols of Himeji) or rippling water, which lights up
the street brilliantly. The event held on Oct. 3 was a special program depicting pink ribbons. This pink illumination
serves to raise everyone's awareness of breast cancer and aims to increase the rate of breast cancer screening.
* This movement aims to spread correct information about breast cancer and encourage women to have breast cancer
screening at an early stage. The ribbon movement differs by country in terms of what each color theme means, but
the pink ribbon has become universally known to represent breast cancer awareness.
Contributions to the Local Communities of USHIO KOREA (UKI)
Paying Respects to Local Elderly People
In fiscal 2016, USHIO KOREA decided to hold a CSR Day (volunteer day) on September 11. Volunteers delivered rice,
fruit, canned goods and other daily necessities to local elderly people living around the facility.
Among the elderly we visited, some were unable to walk freely or go shopping, so we hope our help had a positive
impact on their lives.
Looking ahead, we will continue to give back to local communities with the aim of contributing even a little to the
development of society.
Offering Work Experience Targeting Junior High School Students
As a part of its contributions to local communities, on November 20, 2015, UKI once again offered junior high school
students an opportunity to experience working at a company.
The participating students learnt about actual work situations, including by watching a video introducing the Company,
exchanging business cards with the president, participating in a video conference, and sending emails. Although shy at
first, the students were eager to take advantage of this experience, describing in the end how they felt glad to have
had a fruitful day in which they engaged in actual work while learning more about UKI.
Moreover, this work experience program also served as an opportunity for us employees to reaffirm the new value
that we create through our work. We hope that this experience will give the students a better understanding of the
importance of work.
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Contributions to the Local Communities of USHIO PHILIPPINES (UPI) Contributions to the Local Communities of USHIO AMERICA (UAI)

Donation of School Uniforms to Elementary School Children Donation of Toys to the “Spark of Love Toy Drive”

On June 26, 2015, USHIO PHILIPPINES collaborated with other companies in the industrial park to give donations to In the US, the holiday season starts around Thanksgiving in November and runs
elementary schools nearby. These elementary schools have many children who come from economically disadvantaged through Christmas in December, with a variety of events held around town as
homes, so UPI gave them new school uniforms. people go shopping for food and gifts. However, some families do not have
enough money to pay for holiday dinners and Christmas presents for their
The children who received new school uniforms said “malaming salamat po” (thank you) with smiles on their faces. children, so this period is also a time for charity work. Toy drives collect
Seeing children smile is wonderfully rewarding, no matter which country it is. unwrapped toys, sporting goods and other presents, and are then delivered to
local children (who want them) for Christmas.

UAI and the Irvine Plant called upon its employees to give donations for
Contributions to the Local Communities of CHRISTIE DIGITAL SYSTEMS Christmas presents. The boxes full of gifts were handed over to the “Spark of
Love Toy Drive,” a program that has been run for more than 20 years by the
local TV station and fire department.
Toys that were donated by UAI
Donation of Electronic Parts Waste Materials UAI plans to participate in toy drives every year as a part of its CSR activities.

CHRISTIE DIGITAL SYSTEMS salesforce member Christie Arizona donated electronic parts waste materials to a local
non-profit organization called AZStRUT (Arizona Strut), a student group in Arizona that has formed partnerships with
local schools and companies.

The donated electronic parts waste materials are repaired or remodeled by AZStRUT and given to high schools and
universities in Arizona, thereby enabling students learning about computers to have the opportunity to work with
actual electronic parts. Equipment that cannot be remodeled is recycled.

We contribute to society by recycling monitors, PCs and video processors that had originally been designated for
waste landfills.

Participation in the United Way Campaign

Approximately 300 employees at Christie Canada, a business site of CHRISTIE DIGITAL SYSTEMS, participated in a
kick-off event for the United Way campaign. The theme of this year's campaign was “healthy people, strong
communities.” Aiming to support a variety of programs and services in local communities, United Way provides
assistance to local residents for improving their physical and mental health to support healthy family lifestyles.

Christie Canada helped to promote the annual United Way campaign through the kick-off event and by offering
employees the opportunity to participate via a payroll deduction system. The campaign raised a total of 47,062
Canadian dollars (about ¥4.33 million) in donations.